CoxFDIChina - Foreign Direct Investment and the Peoples...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Foreign Direct Investment and the People’s Republic of China: Further Burgeoning Prospects Seth Cox Economics 508 Winter 2005 3 March 2005
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cox 2 I. Introduction A. FDI and Development Investment in developing economies giving rise to foreign control of domestic economic resources in the context of the modern political-economic landscape can and quite often does represent far more than the sheer capital offering. Foreign direct investment (FDI) is an, but not the sole, engine of modernization and economic development ultimately improving living standards. Exemplary of this phenomenon are the economies of East Asia, often coined the newly-industrialized countries, to which foreign investment contributed significantly. The economic development of China will be examined, relevant to patterns of direct foreign investment and the peculiar policy environment. China has quite evidently utilized FDI as a modernizing force with much success in the reform era, becoming the world’s leading recipient of FDI in 2002. 1 Despite such success, it is equally evident that the People’s Republic of China (PRC) can do much to inflate the force of FDI in their economy. As a developing economy in the international arena, the PRC lag far behind their brethren in terms of FDI per capita. 2 As such, the prospects for increasing the quantity and quality of FDI inflows are deserving of attention as well. B. FDI: Defined and Generalizations To begin a discussion of FDI, it would be quite instrumental to initially define and appreciate the term. As earlier hinted, foreign investment can best be defined as direct when said investment gives rise to foreign control of domestic economic assets. 3 Stated more eloquently by the IMF, FDI “is made to acquire a lasting interest in an enterprise operating in an economy, other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise.” 4 Thusly, FDI is in excess of a threshold determining the amount invested equates to an “effective voice” in the firm’s management, control beyond that of the mere portfolio investor, authority 1 “Attracting Investment to China.” (2003). OECD Policy Brief, Sept. 2003, http://www.oecd.org 2 “Attracting Investment to China” 3 Huang, Yasheng. 1999. “Why is There So Much Demand for Foreign Equity Capital in Asia: An Institutional and Policy Perspective,” Weatherhead Center for International Affairs work. paper March 1999, http://www.ciaonet.ord/wps/huy01/huy01.html. 4 Huang 2
Background image of page 2
Cox 3 determining the firm’s actions as a corporate entity. However, this threshold is not determined by normative standards, such as those espoused by international economic institutions, but rather by positive sovereign imposition. Foreign investment is differentiated between direct and indirect forms relative the amount invested and the net ‘worth,’ or assets withholding debt of a particular firm. The level in the US, the proclaimed economic hegemon, for foreign
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

CoxFDIChina - Foreign Direct Investment and the Peoples...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online